Can a Federal district court ever have subject-matter jurisdiction to hear a declaratory judgment action of non-infringement for a disclaimed patent?  Of course, the Federal Circuit explained this week in the Apotex Inc. v. Daiichi Sankyo, Inc. case, at least if you are in the wild world of the Hatch-Waxman statute.  In this case, Apotex was a second ANDA filer seeking to market a generic version of Daiichi's Benicar® drug product for treating hypertension.  The first filer, Mylan Pharmaceuticals, Inc. (or Matrix Laboratories, which is now Mylan) was unable to invalidate one of the Orange Book listed patents during its ANDA litigation with Daiichi, so a judgment of infringement was entered against it.  However, Daiichi disclaimed the only other listed patent -- one which would have been expired later.  Nevertheless, despite requests for delisting, both patents were still found in the Orange Book.  Thus, Apotex included a Paragraph III certification for the patent that had already been litigated, but was forced to include a Paragraph IV certification for the disclaimed patent.  Not only did Daiichi not sue Apotex after receiving notification of the certifications, but it filed a motion to dismiss for a lack of case or controversy which the U.S. District Court for the Northern District of Illinois granted.  Mylan also moved to intervene, but this was dismissed as moot.  The Federal Circuit reversed, in part, because even though the patent was essentially non-existent, "Apotex has a concrete, potentially high-value stake in obtaining the judgment it seeks," and therefore a substantial controversy existed to warrant the issuance of a declaratory judgment.

This case is specific to Hatch Waxman litigation.  Most of the analysis focused on the statute and the Congressional purpose in passing both the original statute, as well as the changes related to forfeiture of the 180-day generic exclusivity included in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ("the MMA").  However, case-or-controversy analysis is universal.  The Court highlighted four considerations for this case: (1) whether the parties lack a concrete stake in the outcome of the declaratory judgment action in view of the patent disclaimer; (2) whether the alleged harm is traceable to Daiichi; (3) whether Apotex' failure to obtain tentative approval caused the case to be too contingent on future events; and (4) whether Apotex's alleged harm can even be redressed in view of the statutory scheme surrounding Mylan's generic exclusivity period.

Patent Disclaimer

The Federal Circuit quickly rejected the District Court's conclusion that the statutory disclaimer of the Orange-Book listed patent means there is no adversity between the parties.  In this case, it is the listing of the patent that creates the "adverse concrete interests" in the outcome for all three parties (including Mylan).  In other words, "by any common-sense measure, the parties have substantial, concreate stakes in whether Apotex secures the non-infringement judgment it seeks" to allow entry into the market.  This stems in large part from the substantial revenue that Apotex stands to gain if it can obtain early approval, as well as the commensurate revenue that both Daiichi and Mylan stand to lose.

Traceable Harm

The Court also rejected Daiichi's argument that the harm is not traceable to it because the delayed entry of Apotex's generic drug product does not rest solely with Mylan and its period of generic exclusivity.  Again, it is the listing that gave rise to the harm.  If Daiichi's disclaimed patent, U.S. Patent No. 6,878,703 ("the '703 patent") were not listed in the Orange Book, Mylan would have only been left with a Paragraph III certification for U.S. Patent No. 5,616,599 ("the '599 patent") after losing at the district court.  Without the '703 patent, Mylan would have been forced to forfeit its eligibility for the 180 days of generic exclusivity.  Therefore, it was the patent that was as-of-then improperly listed in the Orange Book that was supporting Mylan's exclusivity period.  It was this barrier that was caused by the "listing" that Apotex was seeking to eliminate through a declaratory judgment.  The Court did clarify, though, that the propriety of the original patent listing was not important.  Instead, "as long as it is 'likely, as opposed to merely speculative,' that the consequence would be the concreate one of advancing the date of approval by the FDA and market entry by Apotex."

Uncertainity Based on Lack of Tentative Approval

The Court next considered whether the relief sought by Apotex would be too uncertain prior to its receiving tentative approval for its ANDA to support a declaratory judgment action.  After all, the ultimate relief would depend on the action of a third party -- the FDA.  However, the Federal Circuit noted that the "congressional judgment" found in the Hatch Waxman statute "makes clear that tentative approval for [the ANDA filer] is not a precondition to adjudicating the patent issue."

The filing of the ANDA is an "artificial act of infringement" that allows litigation to take place prior to FDA approval.  In fact, nowhere in the statute is it suggested that approval is required -- rather it is the filing of the ANDA that is the act of infringement.  To find otherwise, the Court continued, would be nonsensical.  The ANDA applicant must include the certification in its ANDA, it must give prompt notice to the NDA holder, and the NDA holder has only 45 days in which to bring suit to obtain the statutory 30-month delay.  It is unrealistic to think that approval (or tentative approval) will occur in these 45 days.  "Accordingly," the Court concluded, "tentative approval of an ANDA is generally not a precondition to the existence of a case or controversy concerning patents listed in the Orange Book."

Redress of Harm

Finally, the Court looked to whether the declaratory judgment action could actually redress the harm faced by Apotex, specifically whether a judgment of non-infringement would trigger the forfeiture of Mylan's 180-day exclusivity.  The cases before the MMA amendments are not necessarily applicable because many of the changes introduced by that statute were meant to address the problems resulting from the period of generic exclusivity.  For example, before the MMA amendments, the first ANDA filer could essential "park" its exclusivity, thereby preventing any follow-on applicant from reaching market before the Orange Book listed patents expired.  The MMA introduced various "forfeiture" provisions to make it possible for secondary ANDA filers to break through this roadblock.

One of these "forfeiture" events is a final, non-appeal decision that a patent is invalid or not infringed.  Specially, the first filer has 75 days from the date that the first applicant or another applicant with "tentative approval" brings "an infringement action . . . against that applicant with respect to the patent or in a declaratory judgment action brought by the applicant with respect to the patent, a court enters a final decision from which no appeal (other than a petition to the Supreme Court for a writ of certiorari) has been or can be taken that that patent is invalid or not infringed."  There are two conditions that must be met -- (1) there must be tentative approval and (2) there must be a finding of non-infringement.  Apotex can therefore "trigger forfeiture in this case by obtaining the judgment it seeks here and by obtaining tentative approval . . . ."  The Court rejected Mylan's assertion that the "tentative approval" must precede the initiation of a DJ action of non-infringement for a lot of the same reasons expressed above.

Because the Federal Circuit found that a case or controversy existed, it reversed the judgment of the District court.  In addition, the Court reversed the denial of Mylan's motion to intervene.  Mylan has a direct and immediate interest, and it stands to either gain or lose because of the "direct legal operation and effect of the judgment."

Apotex Inc. v. Daiichi Sankyo, Inc. (Fed. Cir. 2015)
Panel: Circuit Judges Taranto, Mayer, and Clevenger
Opinion by Circuit Judge Taranto